SEC Charges Lawyer and Her Husband in EB-5 Fraud

(HedgeCo.Net) The Securities and Exchange Commission has charged a California-based immigration attorney and her husband in a fraudulent scheme that generated millions of dollars of undisclosed compensation from foreign investors seeking permanent U.S. residency through the EB-5 Immigrant Investor Program.

The SEC’s complaint alleges that Jean Danhong Chen, Tony Jianyun Ye, and Law Offices of Jean D. Chen, with the assistance of a personal friend, Kuansheng Chen, secured over $10 million in undisclosed commissions by selling EB-5 securities to hundreds of Chen’s legal clients. The complaint also alleges that Jean Chen and Ye secretly acquired and operated an EB-5 regional center, Golden State Regional Center LLC, and later advised clients to invest in the center’s projects without disclosing their ownership interest. According to the complaint, Kai Hao Robinson assisted in the scheme by posing as the sole manager in control of Golden State when she was in fact merely a figurehead controlled by Jean Chen and Ye.

After learning of the SEC’s investigation, Jean Chen and Ye allegedly backdated documents and scrubbed other business records to conceal their role in the alleged scheme.

“Ms. Chen’s alleged self-dealing breached her clients’ trust and violated the federal securities laws,” said Melissa R. Hodgman, Associate Director of the Division of Enforcement. “Where conduct harms investors in our markets, attempts to stymie our investigation by fabricating evidence and withholding documents will not deter our efforts.” The SEC’s Office of Investor Education and Advocacy has issued an investor alert describing steps that can be taken to research EB-5 offerings.

The SEC’s complaint, filed in federal district court in the Northern District of California, alleges that the defendants violated or aided and abetted violations of antifraud provisions of the federal securities laws, and that certain of the defendants violated or aided and abetted violations of registration provisions. The complaint seeks permanent injunctions, disgorgement, prejudgment interest, civil penalties, and the appointment of a receiver.